Focus on Qscan as Morrison hunts advisers

Qscan is a medical imaging and patient care business.

Infrastructure asset manager Morrison is believed to be courting advisers for the sale of Qscan after it led a consortium to buy the business in 2020 for $735m.

The understanding is that the plan is to offer up the radiology business to suitors in 2026, and it comes after Qscan’s majority owner Infratil talked up the merits of the healthcare provider in its results on Wednesday.

“Qscan produced excellent double-digit earnings growth with RHCNZ Medical Imaging not far behind, with both getting on top of the sector’s inflationary pressures,” the Australian-listed infrastructure investor said while delivering a $NZ286m ($265m) loss for the year to March 31.

The loss compared to a $NZ761m net profit in the previous corresponding period and was on the back of a reduction in increase of the value of its assets.

Infratil, which is managed by Morrison, owns 56.2 per cent of Qscan and valued its stake at $NZ454.5m, suggesting an asking price of close to $1bn for the business if placed on the market.

The company said in its results as part of its medium-term strategic objectives that it would divest businesses “unlikely to scale” under its ownership and reinvest.

It said it expected more than $NZ1bn in proceeds.

Market sources said they believed that the group would likely be referring to a Qscan sale.

Qscan’s earnings before interest, tax, depreciation, amortisation and fair value movements was $NZ77.2m for the year to March, up $NZ9m from the previous corresponding year after it capitalised on Medicare indexation, revised pricing strategy, higher-value methods of treatment and productivity gains from technology improvements.

During the year, it also refinanced $NZ445m of debt.

Infratil said it expected Qscan’s EBITDAF to be between $NZ80m and $NZ95m for the 2026 financial year.

When Qscan was for sale by Quadrant Private Equity in 2020, under bidders for the business included Ramsay Health Care, Permira, which owns the country’s largest diagnostic imaging provider I-MED, and Queensland Investment Corporation.

Qscan describes itself as a leading diagnostic imaging provider, operating at least 75 clinics with more than 100 radiologists and 1500 staff.

Most of its operations are in NSW and Queensland, with a number in regional locations.

The Morrison & Co Growth Fund owns 15 per cent of Qscan and the remainder is owned by doctors and management.

The sale price in 2020 equated to between 12.7 and 14.1 times its forecasted EBITDA range of $52m to $58m for the 2021 financial year.

Talk of a sale comes amid challenging conditions in the healthcare industry, with radiologists hard to come by and increasing costs.

Recent efforts by Permira to sell the country’s largest diagnostic imaging provider I-MED for at least $3bn stalled, after infrastructure investor Stonepeak was believed to be weighing an acquisition.

In recent years, Infratil has also made efforts to sell its retirement living business, RetireAustralia, which generated $NZ80m of underlying annual profit.

It wrote down the value of its 50 per cent holding by $NZ85m to $NZ404m.

But its investment in data centre company CDC has increased, with its overall value now at $NZ13.7bn and its own stake increasing to $NZ7.2bn from $NZ4.4bn.